Ireland and Japan are assumed to produce only wool and steel,to have full employment and complete mobility of resources between industries.Their production possibilities boundaries before trade are drawn in solid lines.It is assumed that the two countries have the same amount of resources.Their consumption possibilities after trade are shown by the dotted lines.The outputs of wool and steel are given in physical units. FIGURE 32-1
-Refer to Figure 32-1.Before any trade takes place,the opportunity cost of a unit of steel is

Question

Ireland and Japan are assumed to produce only wool and steel,to have full employment and complete mobility of resources between industries.Their production possibilities boundaries before trade are drawn in solid lines.It is assumed that the two countries have the same amount of resources.Their consumption possibilities after trade are shown by the dotted lines.The outputs of wool and steel are given in physical units.  FIGURE 32-1
-Refer to Figure 32-1.Before any trade takes place,the opportunity cost of a unit of steel is

Quizplus · Accepted Answer

The opportunity cost of a unit of steel is the amount of wool that must be given up to produce one unit of steel. In Ireland, to produce one unit of steel, 3/4 units of wool must be given up (moving from point A to point B on the production possibilities curve). In Japan, to produce one unit of steel, 3/8 units of wool must be given up (moving from point C to point D on the production possibilities curve). Therefore, the opportunity cost of a unit of steel is 3/4 unit of wool in Ireland and 3/8 unit of wool in Japan. Choice A is the correct answer.

Ireland and Japan Are Assumed to Produce Only Wool and Steel,to